Netflix shares fell more than 5% on Tuesday after the streaming giant’s latest quarterly results failed to ease investor concerns about slowing audience engagement and decelerating revenue growth.
Investor Focus Shifts From Profitability To Momentum
In a letter to shareholders, Netflix acknowledged concerns about growth in viewing hours, one of its key engagement metrics. “We know there’s some investor concern about our view hours growth,” the company said, adding that it remained “confident” it could accelerate the trend.
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Despite its strong profitability, Netflix has struggled to consistently meet market expectations in recent quarters as competition intensifies across streaming, gaming and live sports. John Belton, portfolio manager at Gabelli Funds, said the company “has underperformed significantly over the last 6-12 months,” citing softer engagement, slower revenue growth, a more cautious margin expansion outlook and recent changes in content leadership.
Quarterly Results Beat Estimates, But Questions Remain
For the third quarter ended in September, Netflix reported revenue of $12.87 billion and net income of $3.7 billion, both above analyst expectations, according to FactSet.
The company did not disclose total viewing hours for the quarter but reported that viewing in India increased 24% year on year. In July, Netflix said subscribers had watched 97 billion hours of content in the first half of the year, up 2% from the same period in 2025.
Netflix stopped reporting subscriber totals in early 2025, putting greater emphasis on engagement, monetisation and margin expansion as measures of business performance.
International Markets Outpace U.S. Growth
Netflix highlighted stronger performance across international markets while acknowledging that growth in the United States remains slower than it would like.
“We do need better execution in the US. Our content around the world is largely working,” co-CEO Ted Sarandos said during Tuesday’s analyst call, pointing to growth in engagement, subscribers, revenue and profits across Latin America, Europe and Asia.
“The US is also working. It’s just not growing as fast as it could or as fast as we’d like,” he added.
Workforce Cuts And Leadership Changes Signal A Strategic Shift
Netflix is reportedly planning to cut around 6% of its workforce, equivalent to roughly 1,000 jobs, according to media reports. Seven senior employees overseeing television deals and content were among those affected, The Hollywood Reporter reported last week.
The company has also changed leadership in its content division. CNBC reported that Netflix replaced chief content officer Bela Bajaria, who oversaw hit series including Stranger Things, Bridgerton and Squid Game, as well as the company’s expanding live entertainment business. Former Disney executive Peter Rice has been named the new content chief.
“Peter Rice understands talent relations, and in a competitive market, creative talent have choices of where they want to work,” Sarandos said.
Live Sports, Gaming And Advertising Become Growth Priorities
As competition among streaming platforms intensifies, Netflix is expanding beyond traditional on-demand video. It has moved further into live sports, securing deals to stream major events such as the Olympics and the World Cup, while investing in gaming and shorter-form content. The NFL and WWE are also set to stream live events on the platform.
The strategy reflects the need to attract and retain both paying subscribers and audiences supported by advertising. In the United States, Netflix accounted for 7.8% of streaming television viewership in July, compared with 14.2% for YouTube, which reached a record share for the Google-owned platform, according to Nielsen. The World Cup also contributed to higher overall television viewing that month.
Sarandos nevertheless stressed that traditional entertainment remains central to Netflix’s business. “It’s really important to remember, roughly 95% of our spend and nearly all of our revenue is focused on that core, where we see a long runway for future growth,” he said.
Advertising remains another area where the company is seeking stronger results. Netflix said growth in ad revenue fell short of its internal target for the year.
“We are currently a bit behind our aggressive target for the year. We’re still growing,” co-CEO Greg Peters said. He added that the rollout of new products, including additional ad formats, was helping support growth.
Investors Look For Evidence Of Renewed Growth
Netflix remains highly profitable, but its latest results show that strong earnings alone may not be enough to reassure investors. The market is looking for evidence that the company can accelerate viewing engagement, strengthen advertising revenue and improve its growth trajectory in the United States.
How effectively Netflix delivers on those priorities will be key to restoring investor confidence.
